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Question 6 (1 point) Publicly traded Firm X (with limited liability) invests at year 1 for research on a new drug. This initial investment (at

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Question 6 (1 point) Publicly traded Firm X (with limited liability) invests at year 1 for research on a new drug. This initial investment (at year 1) is financed by debt, which is due at year 3, and is senior to any subsequently issued debt. At year 2, firm finds out that, it must spend an additional $200 to continue this project. With additional funding at year 2, the project matures in year 3, and yields cash flow of $300. Without additional funding, the project stops and no cash flow in year 3. We focus is on firm X's decision at year 2 (when additional financing is decided). If the project intial investment is $150 and the face value (repayment at year 3) is $180. Will shareholders of firm X provide addional funding and continue the project (Yes/No)? O No Yes

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